ABC's cash book on 31 January 20X1 shows a bank balance of £1,695 overdrawn. When the transactions in the cash book were compared to those in the bank statement the following was noticed:
A cheque for £276 from a customer, which was paid into the bank on 28th January 20X1, has been dishonoured on 30th January 20X1.
A cheque written by ABC for £171 on 29th January 20X1 has not yet been presented for payment. The correct bank balance to be shown in the statement of financial position at 31st January 20X1 is:

Question

Quizplus · Accepted Answer

The correct bank balance is calculated by adjusting the cash book balance for the dishonoured cheque and the unpresented cheque. The dishonoured cheque of £276 needs to be added back to the overdraft since it was not successfully credited to the account, making the new balance £1,695 + £276 = £1,971 overdrawn. The cheque for £171 not yet presented does not affect the calculation as it is already reflected in the cash book balance but not in the bank statement.

ABC's Cash Book on 31 January 20X1 Shows a Bank